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The Importance of Setting Financial Policies for the Practice

If you ask the average person for a list of wealthy professions, dentistry probably makes an appearance. However, the average person is unaware that most dentists graduate with hundreds of thousands of dollars in debt from student loans, dental equipment purchases, and virtually no income for the past eight years.1 It can be difficult for young dentists to overcome these financial obstacles straight out of the graduation gate, and that's why financial arrangements are so important.

Dentist and financial expert, Dr. Douglas Carlsen, recommends paying off student loans before taking out any other loans for your practice, a home, a car, or accumulating any credit card debt. If you can manage living like a student for a few more years after graduation, you'll be in a better position to start saving money for retirement and your children's future college education. While your debt may seem out of control at times, you can learn to manage your practice so that a steady flow of income funds your bank account.

Financial Arrangements Are Necessary

The first thing that you must realize as a new dentist is that you aren't the only one struggling with debt. Many of your patients live within monthly budgets for personal and household expenses. Your patients' financial security takes a hit when dental emergencies happen. You can usually make quick and amenable arrangements with patients that have an established history with the practice. However, you may need to obtain a credit report, a W-2 form, or consult an outside loan agency when new or slow-paying patients are involved.

Financial arrangements should be simple and straightforward so that there is no confusion and no legal discrepancies. They should always be made in writing, include all parties' names and dated signatures, and spell out the specific amounts and time frames. Your dental office should have its own internal financial arrangement written protocol to keep dental professionals and patients on the same page.

Pre-Financial Arrangement Considerations

Regardless of your practice's relationship with a patient, there are a few basic components that need to be considered before settling on a financial arrangement. First, consider the total fee for the required dental services and what the balance will be after deducting a down payment. Perhaps there will be an annual percentage rate of the finance charge that needs to be taken into account. Once you have an understanding of these figures, you can better determine the number of payments that need to be made, the amount of each payment, and the date that each payment should be due.

Always review treatment plans with your patients to answer their questions and address their medical and financial concerns. Visual aids, like intraoral camera pictures and virtual treatment simulations, can be helpful when explaining procedures to patients and stressing the importance of intervention. When you're recommending a treatment that costs into the thousands of dollars, it's helpful to have a trained treatment coordinator/financial coordinator staff member present.

Financial Arrangements for Insurance Patients

Ongoing changes in the healthcare industry force dental practices to continually improve upon their revenue cycle processes. Medicare and Medicaid have begun to reduce physician reimbursement, and private insurance companies have negotiated rate contracts that pay at less than full value of charges rendered. Although pleasant staff-patient relations go a long way in securing a patient base, a sound financial policy is the next best way to secure a positive revenue cycle.

Make sure that your financial staff has an understanding of insurance benefits, insurances accepted, and insurance limitations. You and your staff need to be able to explain to patients that dental insurance isn't mean to be a pay-all, only an aid. Your patients must understand that many routine dental services aren't covered by insurance and that they will be responsible for unpaid balances.

Formula for Success

In the most basic sense, financial policies must always be reviewed by legal counsel, communicated in writing, and signed by you and the patient. Make sure that the arrangement provides guidelines for collecting everything from co-payments to unpaid balances, insurance information, and a description of instances when prepayment of services would be required. You must employ competent staff skilled in record-keeping so that you maintain an accurate database of patient account and on-file credit card information.

Be consistent with your practice's financial policy and make the options transparent. Try offering incentives so that your patients pay their bills early, and refuse to see patients until everyone has an understanding of the payment arrangements. To ensure financial success and establish an effective patient recall system, you'll need to gain patient acceptance through education and treatment planning.

There's a definite psychology behind managing debt while not becoming discouraged at the onset of a new career. To run a successful dental practice, you must help you patients realize that they are more than just a set of teeth or another dollar in the bank. Until your patients feel confident that you have their best medical and financial interests in mind, your business will remain stagnant. Understand that finances are complex in your personal life, your professional life, and your patients' lives. If you can help your patients afford the care they need, your practice will flourish and your personal debt will lessen as a result.



1. Dental Student Debt. https://www.asdanet.org/index/get-involved/advocate/issues-and-legislative-priorities/Dental-Student-Debt. Accessed June 19, 2017.


Table 1: Topics to Include in a Financial Arrangement Protocol

  • Status of insurance for new patients
  • Payment plan options
  • First visits for emergency patients
  • Secondary insurance policies
  • Crown and bridge protocols
  • Removable prosthodontic protocols
  • Outside agency financing partners
  • Protocol for divorced patients and children of divorced patients
  • Protocol for patients who receive special discount

Table 2: Types of Dental Insurance

  • Traditional indemnity policies: Traditional arrangement where the dentist submits a claim to the patient's insurance, which pays benefits based on the terms and conditions of the policy
  • Capitation plans: Arrangement where a dentist is contracted to provide dental services for the insurance plan's members
  • Preferred provider organization plans: Arrangement where the insurance company contracts with dentists to create a network of treatment providers
  • Exclusive provider organization: Arrangement where patients are given no other option than receiving treatment from a dentist who is part of their insurance plan's network of providers
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